California Insurance Commissioner Announces Moratorium on Cancellations and Non-Renewals for Residential Property Insurance Amid Southern California Wildfires

California Insurance Commissioner Announces Moratorium on Cancellations and Non-Renewals for Residential Property Insurance Amid Southern California Wildfires

On January 9, 2025, Insurance Commissioner Ricardo Lara issued an official notice urging insurers to temporarily halt cancellations and non-renewals of residential property insurance policies for properties affected by the recent wildfires in Southern California. This action is in response to the widespread destruction caused by the fires, including the Palisades Fire, Eaton Fire, and Tyler Fire, which have left many residents struggling with evacuation and recovery efforts.

Key Measures to Protect Homeowners:

1. Moratorium on Cancellations and Non-RenewalsAs part of California's ongoing efforts to support wildfire-impacted homeowners, Insurance Commissioner Lara has mandated that insurers must cease pending cancellations and non-renewals for residential properties located within or around the fire-affected areas. This moratorium is in effect for at least one year after the declaration of a state of emergency, as outlined in California Insurance Code Section 675.1(b)(1).

2. 60-Day Grace Period for Premium PaymentsIn recognition of the hardships faced by homeowners in the wake of these fires, insurers are required to extend a 60-day grace period for premium payments for policies in the affected areas. This grace period aims to relieve financial pressure on property owners during this challenging time. Insurance companies are encouraged to offer even longer grace periods where possible, as long as they do so equitably and without considering the policyholder's claims history.

3. Protections for Policyholders After Total LossesIn cases where a residential property has sustained total loss due to a declared disaster, insurers are required to offer policy renewals for at least two additional annual periods, providing stability for affected homeowners during their recovery process (Cal. Ins. Code section 675.1[a][3]).

4. Pause on Pending Non-Renewals and CancellationsThe notice also calls for insurance companies to halt any pending non-renewals or cancellations scheduled to take effect on or after January 7, 2025. This includes policies where the insurer had issued notices of non-renewal or cancellation within the previous 90 days. By postponing these actions for six months, the goal is to help communities focus on rebuilding without the added burden of losing coverage during the recovery period.

Further Guidance for Insurers and PolicyholdersInsurance companies are reminded of their obligations under California law to ensure that all relevant staff and claims adjusters are familiar with the protections available to policyholders affected by declared disasters. This includes offering extended timeframes for claims related to replacement costs, additional living expenses, and other benefits triggered by the wildfire disaster.

For more information or inquiries about this notice, policyholders and insurers can reach out to Jully Pae at the California Department of Insurance at Jully.Pae@insurance.ca.gov.

For the full text of the notice and related documents, you can visit these resources:

• Governor's State of Emergency Declaration for Palisades and Eaton Fires

• Significant California Laws Pertaining to Residential Property Insurance

This proactive measure from Insurance Commissioner Lara aims to ensure that California residents affected by the devastating wildfires can focus on recovery without the additional concern of losing their property insurance coverage.

California Residential Property Insurance Laws - Key Updates for 2025

California Residential Property Insurance Laws - Key Updates for 2025

The California Department of Insurance (CDI) has issued the 2025 Annual Notice regarding significant changes to laws governing residential property insurance policies, particularly in the context of a declared state of emergency. These laws directly affect how insurers handle claims related to disasters, such as wildfires, and set forth important guidelines for claims adjusters and policyholders alike. Below is an overview of the major updates.

1. Claim Settlements for Fire Losses

• Actual Cash Value (ACV): Insurers must calculate ACV losses by subtracting depreciation from the cost to repair, rebuild, or replace damaged structures. The depreciation applies only to components that typically wear out during the structure's life​.

• Replacement Cost: Policies must provide full replacement cost for structures without depreciation deductions, though the payment is limited by the policy's coverage​​.

• Time to Collect Replacement Cost: Insured individuals have up to 12 months (36 months in emergencies) from the date of the first payment to claim the full replacement cost​.

2. Living Expenses and Housing Provisions During Emergencies

• Additional Living Expenses (ALE): Coverage for ALE must last at least 24 months from the date of loss in cases of state emergencies, with potential extensions for up to 36 months if there are delays in rebuilding​.

• Reasonable Habitation: If a home becomes uninhabitable due to a covered peril, ALE coverage cannot be limited, though insurers can offer an alternative remedy if needed​.

• Advance Payments: Insurers must offer at least four months of living expenses as an advance payment to policyholders who face total loss claims​.

3. Claims and Adjusters

• Changing Claims Adjusters: If an insurer assigns a third or subsequent adjuster within six months of a claim, they must provide the insured with a written status report​.

• Appraisal Rights: In the event of a government-declared disaster, either party (insured or insurer) can request an appraisal, but it cannot be compelled​.

4. Wildfire Risk and Rating Adjustments

• Wildfire Risk Models: Insurers using wildfire risk models to adjust premiums must provide policyholders with their wildfire risk scores, and policyholders have the right to appeal their classifications​​.

• Disclosure Requirements: Policies must prominently display information regarding fire coverage, especially in high-risk wildfire zones. If a policy excludes fire coverage, it must include a signed acknowledgment from the insured​.

5. Important Updates on Policy Renewals and Cancellations

• Non-Renewal Restrictions After a Disaster: Insurers are prohibited from non-renewing a policy due to a fire disaster for at least two years unless there are significant changes to the property that make it uninsurable​.

• Grace Period for Premium Payments: After a state of emergency, insurers must offer a 60-day grace period for premium payments in affected areas​.

6. California FAIR Plan and Home Insurance Finder

• Fire Coverage Requirements: If a policy does not cover fire, insurers must inform the insured and provide resources to find fire coverage via the California FAIR Plan​.

• Non-Renewal Notifications: Insurers must provide clear notices regarding non-renewal and include details about accessing the California Home Insurance Finder​​.

For further details on these laws, you can explore the full text of the relevant sections of the California Insurance Code using these resources:

• California Insurance Code Section 2051

• California Insurance Code Section 10103.6

• California FAIR Plan

These updates provide essential information for insurance professionals, policyholders, and those affected by disasters. Ensuring compliance with these laws can help streamline the claims process and offer better protection for homeowners during emergencies.

Notice on Solicitation by Public Adjusters in the Southern California Wildfire Areas

Notice on Solicitation by Public Adjusters in the Southern California Wildfire Areas

In light of the ongoing wildfires in Southern California, Insurance Commissioner Ricardo Lara has issued an urgent notice to all licensed public insurance adjusters and individuals seeking to offer public adjusting services. This warning addresses the ethical and legal guidelines governing the solicitation of business in the aftermath of a catastrophic disaster such as the current wildfires.

Key Guidelines for Public Adjusters:

1. Licensing Requirements:

   • All individuals performing public adjusting services must possess a valid Public Insurance Adjusters License issued by the California Department of Insurance. This ensures that adjusters are properly qualified to handle claims for disaster victims.

2. Prohibited Solicitation Timing:

   • California law restricts when public adjusters may solicit services from policyholders after a disaster. Specifically, they cannot initiate contact or solicit business from wildfire victims until seven days after the conclusion of the loss-producing event.

   • Additionally, adjusters are prohibited from soliciting services between the hours of 6 p.m. and 8 a.m., unless the policyholder initiates contact. Solicitation is also not allowed while an evacuation order is still in effect.

3. Evacuation Orders:

   • Given that many wildfire-affected areas remain under evacuation orders, public adjusters are required to wait until seven days after the evacuation orders are lifted before they can offer their services. As most areas are still under such orders, this waiting period has not yet started for many victims.

Consequences for Violating the Law: Public adjusters who fail to comply with these regulations may face severe consequences, including civil penalties, license suspension, or even revocation of their public adjusters license.

To learn more about the full set of regulations and laws governing public insurance adjusters in California, including detailed licensing information, you can refer to the Public Insurance Adjusters Act.

This notice serves as an important reminder to ensure that all actions taken during such a sensitive time comply with the law, helping to protect the rights of the victims and prevent exploitation in the wake of disaster.

For more information, you may also contact the California Department of Insurance at (916) 492-3500.

Resources:

• California Department of Insurance Website

• Public Insurance Adjusters Act

Stay informed, stay compliant, and help ensure the protection of vulnerable communities during their recovery.